Basel Committe on Banking Supervision (BCBS - 239)
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This document provides an overview of BCBS 239 principles for effective risk data aggregation and risk reporting. It discusses how most large banks historically managed risks through Excel and Access databases, which were inadequate. BCBS 239 principles address issues with risk management processes, including risk IT infrastructure, data quality, strategy, governance, and reporting. All in-scope banks must implement BCBS 239 guiding principles by 2016. Key impacted areas include market, credit, liquidity, and operational risk management. The approach involves understanding BCBS 239 requirements, gap analysis, a program implementation plan, detailed divisional analysis and projects, an IT solution, data governance, and regulator agreement.
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Basel Committe on Banking Supervision (BCBS - 239)
- 1. BCBS 239 - Principles for effective risk data aggregation and risk reporting : A short over-view. About the Author: Kaushik Pramanik is a seasoned, capable, effective, result-driven banking and finance professional who boasts an exemplary track record of leading and managing transformational change and regulatory multi-million USD projects to large high profile organisations like Citigroup, Credit Suisse, UBS, SIX, PMI etc., utilising over seventeen years of business and IT experience to do so effectively and efficiently. Experienced in the development and execution of solutions on both a global and regional level, encompassing critical analysis, strategic development, and process re-design in order to achieve tangible business benefits which add value and maximise profitability. Offers a comprehensive end-to-end understanding of the change processes, all relevant methodologies and displays advanced skills in problem solving, stakeholder management, decision making and communication to formulate a shared business vision which fulfils organisational overall objectives. Introduction: It has more than a decade now, we understood and realized various issues with banking risk data quality, risk data management, risk aggregation and risk reporting functions. From my own experience in this area over a decade, I have noticed that most of the large tier 1 banks used to manage daily risks and reporting function on excel sheet and MS Access databases back during the late 90s or early 2000. It was never been accepted as a long-term solution and most of the time all reported numbers were not full proof. There was no separate Risk Management division in the bank or Risk Managers were just used to do what traders ask them to do. Many banks have tried to improve the risk management and risk data aggregation function through the automation of processes in Market Risk, Credit Risk, Liquidity Risk and Operational Risk area during the 2003- 2008 period, which eventually decommissioned age old Access and Excel based risk management processes. But still, it has been noticed that Banks’ information technology (IT), data
- 2. architectures, data governance were inadequate to support the broad management of financial risks. Many banks lacked the ability to aggregate risk exposures and identify concentrations quickly and accurately at the bank group level, across business lines and between legal entities. Some banks were unable to manage their risks properly because of weak risk data aggregation capabilities and risk reporting practices. BCBS 239 principles by Basel Committee have been designed to address various issues with risk management processes in the bank or financial institutions, specially Risk IT infrastructure, Risk data quality, Risk data strategy & architecture, Risk data governance, Risk data aggregation, timeliness, accuracy, completeness, data privacy and security, master data management, meta data management and MIS reporting. The Principles cover four closely related topics: Overarching governance and infrastructure Risk data aggregation capabilities Risk reporting practices Supervisory review, tools and cooperation All banks and in-scope financial institutions have to be BCBS 239 compliant or at least develop a robust strategy and plan to implement BCBS 239 guiding principles by the end of 2016. Areas of Impact: All banks and financial institutions, which are associated with trading, investment, wealth management and asset management business will be impacted by BCBS 239 requirements. Following areas of the bank or financial institutions will be impacted by BCBS 239 principles. Market Risk Management, Credit Risk Management, Liquidity Risk Management, Operational Risk Management, Product Control, Front Office, and Operations. Approach to implement BCBS 239: Understand the requirement written in BCBS 239 papers on effective risk data aggregation and risk reporting. Carry-out the high-level gap analysis across divisions, and regions in system level, risk management level and operational level covering four guiding principles. Come-up with a high-level blue print or umbrella paper covering all aspects of BCBS 239 requirements. Define and establish global BCBS 239 Program Management structure, governance mechanism, Program Management Office, accountabilities, execution and implementation strategy, assurance and high- level road map plan. Carry-out detailed analysis in each division globally, plan, execute, control and implement divisional and regional projects related to BCBS 239 requirements aligned to overall Program blue print. Involve Chief Data Officer Organization to implement the IT solution related to BCBS 239 requirements. Establish a separate shared service to maintain, monitor and control data quality across the organization to assure end to end Risk data governance. Agree with regulators or Basel committee supervisors about the content of various risk reporting reports, processes, and MIS reporting. If fully automated solution is not possible at a particular scenario, agree with sub-optimal solution with Basel committee supervisors and control it. Implement BCBS 239 requirements across the organization through number of cross- functional, cross-divisional and cross-regional separate projects operated under BCBS 239 global implementation program. For further details, please contact [email protected]